Considering an SBA LoanAdd to My Luxx Living
Thinking of starting a business?
The number one question consistently asked by any entrepreneur regarding financing needs is, will I qualify for financing.
Start up, cottage industry businesses, where the entrepreneur has minimal cash injection and limited experience should give serious consideration to the U. S. Small Business Administration, (SBA), as a funding program resource for their financing needs.
While the SBA itself does not have money to make direct loans , it does provide incentives to financing sources such as banks, credit unions and other lenders who have partnered and been approved by the SBA.
The SBA incentives provided to the lending institutions are established as a sliding scale guarantee in accordance with the loan program utilized in the loan application process. The guarantee range can be anywhere from 50% to 85% of the face amount of the approved loan. The sharing of the risk related to the funding request is a true enhancement to the qualified and approved lending source to consider the loan approval.
The guarantee provided is a support mechanism to augment small businesses with limited cash, collateral and or experience thereby providing an increased opportunity to financing that would not be available without the utilization of the SBA loan programs.
SBA lenders consider loans to struggling and thriving businesses as well as seasoned operations and start up ventures. There are many benefits to in the utilization of the SBA loan programs. The include the following:
– Lower capital requirements. SBA does not require points or endorse balloon payment loan structures
– Longer amortization periods sometimes up to 25 years dependent upon the loan program
– Higher acceptable loan-to-value financing, up to 90% in some cases
– SBA loan proceeds can be used for nearly any of your business needs. This includes marketing expenses, machine upgrades, purchasing of inventory, regular operating expenses like salaries and utilities, debt refinancing, and facility renovations to name a few options.
The majority of for-profit businesses potentially qualify for an SBA loan. There are unqualified loan purposes and those are clearly identified on the SBA website. The SBA loan programs are viewed as a direct support incentivized initiative to create, assist, grow and maintain the small business economy which is the backbone of the American economic system. The retention and growth of jobs within our economy is essential to our success as a nation.
Any entrepreneur needs to have a vested financial stake in the underlying business. This is the core to growth. If you believe in your ability to establish and or expand your existing business entity and the business results are reflected within the financial framework or projections then your well on your way in the approval process.
There are a series of contingent and positive achievements you need to identify in the application process. Some of these are excellent personal credit scores, good character, a cohesive business plan, financial performance and or projections evidencing the ability to operate profitably with capacity to meet the required repayment terms, (debt service).
Be sure to identify the purpose of the financing request, the proposed collateral offered to secure the borrowing and the ability to meet your financial obligations.
As a quick reference some of the SBA Loan Programs available through approved lending institutions are:
– 7A Program – Business purchase/expansion/working capital/equipment, etc, SBA Guaranty up to 85%
– SBA 504 – Is for real estate acquisition / lower cash injection / up to 90% LTV
– Express – Debt refinance / line of credit having an SBA guaranty up to 50%
– Patriot Express – Expedited qualification for military personnel retired / honorable discharge.
It is recommended that any interested entrepreneur research these loan program options because they can certainly enhance the approval opportunity.
For more information, contact your preferred credit union or financial institution and visit the SBA website for a much broader explanation as to specific loan programs, requirements and required documentation.
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